70% of Sánchez’s fiscal ‘hack’ in 2022 will fall on companies

70% of the tax increase signed by the Government in the General State Budgets (PGE) for next year will fall on companies. The Government estimates that the approved tax reforms will mean an increase in income for next year of some 3,273 million euros, after adding the changes approved this year. Companies will bear, to a large extent, the increase in taxes, specifically 2,271 million, 70% of the total, with the consequent impact on their tax costs.

The increase in tax pressure for the Government of Sánchez has caused the country to lose another four places in the International Fiscal Competitiveness Index of the Tax Foundation. Spain occupies position 27 out of the total of 36 countries analyzed.

In addition, the increased selective taxation for companies, which the Government insists that it will be neutral for individual taxpayers, affects the market. The Institute of Economic Studies (IEE) points out in its report on the PGEs that “the flow of new investments suffers from higher corporate tax burdens, which, in turn, contracts employment and the flow of labor income in the economy“. The IEE recalls that” business activity is an especially positive process that benefits society as a whole through employment and the satisfaction of needs, so the best way to fight inequality and poverty is not to raise the imposition”.

The Government, however, Trust next year’s Accounts to a record collection not seen even before the coronavirus crisis. The Ministry of Finance and Public Function, led by María Jesús Montero, plans to collect 100,132 million euros from the Personal Income Tax (IPRF). In a context of economic recovery still present, this collection would mean, according to the projections of the General State Budgets for 2022, an increase of 14% more than what was collected in the last year before the pandemic (2019), when the State entered 86,892 million euros to the public coffers. In addition, the Treasury plans to exceed the income tax collection for this year by 7,000 million, which will stand at 93,803 million, 6.6% above the collection obtained in 2020.

On the other hand, regarding the collection of Corporation Tax (IS), the Government expects to enter 24,477 million euros, which would represent an increase of 3% compared to the last pre-Covid year, 2019.

Then, income from Corporate Tax was 23,733 million, almost 700 million less than what was projected for the next fiscal year. It should be remembered that, according to data from the Ministry itself, 2019 already represented a collection 4.4% lower than in 2018, taking into account the most optimistic economic situation. About 2021, when Companies accounted for 21,889 million, the increase would be more than 2,500 million euros.

On the other hand, the Government has promised Brussels to implement a major tax revolution starting in 2023. Sánchez has promised to apply a notable tax increase once he has in his possession the conclusions of the group of experts for tax reform, which will initially present its report in February. From that moment, the Government will begin to design a tax plan that will set the future rhythm in Spain, and whose first step will be the fical harmonization between the autonomous communities.